Banking
Banking Services: Cheque Return Fee Only If Customer at Fault
The Reserve Bank of India (RBI) has asked banks to levy cheque return charges only if the customer is at fault. RBI said that cheques requiring re-presentation, without any recourse to the payee, should be presented at the immediate next clearing not later than 24 hours and customers notified through SMS alert, email, etc.
 
RBI has found that the issue was resulting in ‘unsatisfactory customer service’. It was considered necessary to streamline the procedure across all banks. RBI has advised banks to reframe their cheque collection policies (CCPs) for better customer service. Banks are expected to indicate the timelines for realisation of local/ outstation cheques in their CCPs and the charges for cheque returns are expected to be levied upfront with prior notice to the customers.

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Compensate bank customers if they fail to get desired service –Part II

Penalizing banks and compensating the customers for the delay or deficiency in service delivery standards should form the cornerstone of all banking regulations and create an environment of trust and confidence between the banks and the banking public

It is a common practice among banks to levy a penalty on those customers, whether depositors or borrowers, who do not comply with the terms and conditions stipulated. The banks lay down a series of conditions when you open an account or when you borrow from a bank and if you fail to honour these conditions, you are slapped with penalties, which are rising every year without rhyme or reason.
 

For instance, as a depositor, if you do not maintain a minimum balance in your account you are charged a penalty, if you exceed certain number of transactions in your account in a month you are levied a penalty, if you cross certain number of cheques drawn in a month you pay a penalty, to mention a few. Similarly, as a borrower, if you delay payment of an instalment even by a day on your loan account you are charged a penalty, if you do not pay the quarterly interest on your loan account, you are levied a penalty and this goes on and on many times even without any notice to you.
 

Surprisingly, Reserve Bank of India (RBI), as a banking regulator, never questioned this practice followed by banks. The banking public too meekly submitted to these conditions without asking as to why these conditions are a one-way street applicable only against them and nothing against the banks for their failure to comply with their part of the obligations towards banks’ customers.
 

Right to Service Acts passed by state governments:As is well known, a number of state governments in our country have enacted laws which are called as “Right to Service Acts”to ensure that delivery of service by government servants is provided in a time-bound manner. These enactments provide for compensation to the public if they fail to get their requirements completed within the timeframe stipulated by the government.
Even the central government is in the process of enacting a legislation to ensure that all central government services are provided to the public within the stipulated timeframe, failing which compensation will be granted to the applicant till his/her request is complied with. Only time alone will tell whether this will have a desired effect on the life of ordinary citizens and the public will be saved of the harassment faced by them today while dealing with government departments. But certainly it calls for a similar system to be introduced in all public utilities, and banks being the institutions that have largest impact on the life of people of this country, should be the forerunners in introducing these fair dealing practices for the benefit of banking public.
 

RBI is within its powers to stipulate penalties for deficiency in service:A few years back, the RBI had come out with guidelines to all the banks to stipulate time norms for many of the services rendered by banks and display these time norms in the branches for the information of the public. Though most of the public sector banks did come out with time norms for services like encashment of cheques and issue of drafts and displayed them in their notice boards, these norms were never seriously followed.They remained only on paper, as there was no penalty imposed on banks for non-adherence to these time norms.
 

It is possible for the RBI under its existing powers to stipulate penalties for non-delivery of stipulated services by banks and provide for compensation to the banking public for failure of any bank to honour its commitments to its customers. In fact RBI has already made a beginning by levying a penalty of Rs100 per day of delay, if the bank fails to refund within seven days, the amount that has not been dispensed by its ATM but debited to the customer’s account. This in fact has served to make the banks own up the responsibility for proper functioning of their ATMs, without passing the back to the supplier of the machines.
 

Introduce penalties and compensation which are two sides of the same coin:There are a number of instances where customers do not get satisfactory service from the banks.Majority of customers silently suffer on account of indifference of banks even to provide simple basic services like disbursing the pension on the stipulated dates, paying interest on fixed deposits on due dates, etc. The RBI itself has confirmed this situation prevailing in our banking industry on several occasions, but has not forced these tenets of equity, diligence and fair play in their dealings with customers, leaving a bitter feeling of helplessness in the minds of the general public.
 

It is, therefore, necessary for the RBI to identify all types of services rendered by banks to their customers and stipulate time norms for delivery of all such services, which should be mandatorily honoured by banks without any excuse. If any bank does not comply with these time norms for whatever reasons, they should be made to pay a minimum compensation to the customers at a rate, which will serve as a deterrent for repetition of such instances in future. To ensure that this system of compensating the customers is followed both in letter and spirit, the bank should automatically credit the compensation payable to the customers’ account without asking for it.
 

Protect the rights to approach banking ombudsman in case of dissatisfaction:However, it should be ensured by the RBI that this system of giving compensation to the customer at the rates stipulated by the central bank should not take away the rights of the banks’ customers to approach the banking Ombudsman for a higher compensation, if he or she feels that the compensation offered by the bank is not commensurate with the agony and suffering undergone by the customer due to the deficiency in service provided by the bank. For instance, if a cheque is dishonoured by a bank for no valid reason, the customer not only loses his face, but it affects his reputation in society, which cannot be evaluated in terms of money. As per the banking practice, the smaller the amount of the cheque, bigger the compensation payable, as it hurts one’s ego most, if a cheque for a relatively small amount is wrongly returned by the bank for the reason of insufficient funds, when the account had adequate funds to meet the cheque. Therefore, the customer should have a right to approach the Ombudsman, if he/she is not satisfied with the compensation prescribed by RBI and paid by the bank. In actual practice by introducing this new system of empowering depositors, it may bring down the complaints lodged with the banking ombudsman considerably, and help in improving the banker customer relationships to a large extent.
 

Emulate international practice of compensating bank customers:Here is an example of what happened in the UK recently and how banks volunteered to compensate the customers, who had faced problems with their accounts.
 

BBC reported that On 6 March 2013, customers of Royal Bank group covering Royal Bank of Scotland (RBS),NatWest Bank and Ulster Bank were unable to access their accounts and could not even use their cards to withdraw money from ATMs for a couple of hours. The banking group, which is 80% owned by the UK government, blamed a “hardware fault” for causing its systems to crash, but promptly apologized and promised to compensate customers who experienced problems because of the disruption, which lasted for a couple of hours.  The RBS banking group had to honour claims from millions of customers who were unable to withdraw cash, pay for goods and services or carry out telephone or online banking for no fault of theirs. Here is an example of how one customer got compensated by the bank even for a little embarrassment faced by him at a restaurant.
 

As per the BBC report, a customer of the bank had to get someone else to pay for his dinner that evening, as his card was not accepted due to a technical glitch in the bank. The bank instantly offered him 30 pounds compensation, but when he declined, he was offered 70 pounds (equivalent of about Rs6,000) for the embarrassment caused and it was paid into his account straight away.
 

In June 2012, 16 million customers of RBS, NatWest and Ulster Bank had difficulties with cash withdrawals, phone and online banking and debit cards, which the bank had blamed on a software glitch. It was reported by BBC that the disruption was one reason why Stephen Hester, CEO of RBS declined to accept part of the annual bonus. In fact, the bank paid out over 125 million sterling pounds to customers as compensation last year, and branch opening hours were extended to help customers who experienced difficulties. Such is the sensitivity to customers’ inconvenience in countries like the UK, which is worth emulating by banks in our country.
 

RBI should take a cue from this and act promptly:It is very common for banks in India to put the blame on computers for any disruption in their operations and do not pay any heed to customer complaints when computers fail to deliver.After all if computers fail, either the hardware supplier or the software vender should be held accountable, but so far as banks’ customers are concerned, it is the bankthat should be held responsible for compensating the customers who have suffered in the bargain for no fault of theirs. As seen in the U.K example, banks take fullresponsibility for computer glitches as well and had shelled out substantial compensation to customers even when the disruption was caused by hardware and software problems. While banks in the UK have volunteered to compensate the customers on account of public pressure and threat of loss of business, we cannot expect banks in India to do the same here, as they are totally thick-skinned to the point of being indifferent to public opinion and insensitive to customer inconvenience.
 

It is, therefore, necessary for the banking regulator, the RBI, to step in and introduce the system of penalties and compensation for deficiency in all banking services which should be benchmarked against best practices required to be followed by every bank in the country. Penalizing banks and compensating the customers for the delay or deficiency in service delivery standards should form the cornerstone of all banking regulations to give a new orientation to customer service practices and create an environment of trust and confidence between the banks and the banking public.
 

Will the RBI take a cue from the above and empower the depositors and bank customers to take banking service to a new level of customer satisfaction never experienced before in our country?
 

 Read the first part here: Make ‘basic’ banking services free!

(The author is a banking analyst and writes for Moneylife under the pen-name of Gurpur.)

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COMMENTS

MOHAN SIROYA

4 years ago

The 'Greatest Wrong" the RBI has committed is by di-owning its responsibility to supervise the 'exploiitaiton' of bank customers. RBI has given the full liberty to each bank to levy the "service charges" as per theie wish,no dtandradization and or different from bank to bank . It has become a open market. Now it has come to the light from BSCBI that the 'Indian Banks association" ( ABA) has been given an authority to put any 'Cap' on such charges , thus fully abdicating their own duty as a statutory regulator. It is like giving a command to the head to teh head of he 'Money makers'. How such head is expected to control the greed of making more and more money by its own emplyers who are paying their salaries and expenses by way of heavy subscription fees?
The whole scenario has become vitiated and anti-consumer . The Finance Ministry or RBI wants only the banks to get fattened at the cost of Cosumers who are at he receiving end. They have no voice in making the RBI policies? Is this the democracy we talk about ?

MOHAN SIROYA

4 years ago

1. Yes, any law or rule can not be one sided, and is liable to be struck down by the court. So if, under the regulatory rules if the customers are penalized or have paid heavy 'Service Charges' even for a technical fault or being unaware of the repurcussion; the bank must equally be liable to compensate the customer for 'Any deficiency in service by way of delay or even any techincality.
2. Secondly, charges levied by the banks for 'Returned Cheques' on technical ground such as "Signature Mis-match" can not be and should not be charged for both ways viz; by the payer as well as by Payee bank". Tell me, how one is expected to match the signature given to the bank while opening an account say 40-50 years back ? The basic signatue pattern may remain the same, but otherwise in advancing years, some change in the style of signature is bound to happen; especially in the case of senior citizens whose hands often shake while writing or signing. In such a case "Return of CQ un-honoured" is itself an enough embarassment , and to top it, penalizinfg them with 'Cheque Return charges' with ST is simply usurous and atrocious.

hasmukh

4 years ago

Some banks go on debiting charges periodically for "inoperative account", but do not bother to inform the Account holder about the fact that his account is treated as dormant. (although they do have their addresses with them) ! !

arun adalja

4 years ago

nowdays banks are giving cheques printed with names so they require minimum 8 days time to get new cheque book.by chance if you require any cheque from branch they charge rs 50 per leaf,this is really irritating one.rbi must take action.

arun adalja

4 years ago

minimum balance limit must be abolished as it always increasing day by day.today icici and other private banks asking to keep minimum rs 10000 and penalty of rs 750 and psu banks asking 1000 rs and penalty if goes down.why such things?banks wants to become rich by asking mimimum deposits.

ramchandran

4 years ago

Senior citizens need to be treated in a special manner.Banks insist that they visit the branch for signature verification (as they tend to forget their signatures). They need to have a helpline where they can enquire about their balance, give request for cheque books . May be send a bank representative would also help

REPLY

hasmukh

In Reply to ramchandran 4 years ago

Senior citizens may not forget their signatures, but they could sign differently each time and which could differ from specimen signature as per bank's records. Bans must appreciate this and find practical solution to all difficulties,

TIHARwale

4 years ago

Gurpur ji use your offices with Central Bank of India and find out

Net Banking users are provided with a grid card , i understand these come with a one year validity ( as message is flashed on screen that it will expire in 15 days as i try to complete a net banking transcation for e shopping authorisation like mobile recharge, train ticket booking etc )but CBI site is silent about this and branches are unaware. CBI officials at branch level are clueless.

PNB what is preventing PNB in making it PPF accounts online when SBI has done it.

Make ‘basic’ banking services free! –Part-I

In the first part of this two-part series we identify certain basic services rendered by every bank, and ensure that these services are offered free of all charges across the board, so that every customer is treated fairly, equitably and in a non-discriminate manner

 
The Reserve Bank of India (RBI) in its master circular on customer service in banks issued on 1 July 2011 has highlighted the need to empower the depositors in the following words: 
“Depositors' interest forms the focal point of the regulatory framework for banking in India. There is a widespread feeling that the customer does not get satisfactory service even after demanding it and there has been a total disenfranchisement of the depositor. There is therefore, a need to reverse this trend and start a process of empowering the depositor.”
 
Further, RBI in its annual monetary policy for 2013-14 announced earlier this month has, inter-alia, stated that they would issue detailed guidelines by the end of June 2013 with regard to uniformity in Intersol charges levied by banks. 
 
Intersol charges are those levied by banks for using the service of branches other than the home branch, where you opened your account. With the introduction of core banking solution (CBS), many banks have been proclaiming that when you open a savings account with a branch, you become the customer of the whole bank and not of any one single branch. This means that with the use of technology, the benefit of service at all the branches of the bank should be available to you, though technically, your account is maintained in one particular branch, where you opened the account. This is what they call as “anywhere banking”.
 
Here is what the RBI had said in its monetary policy statement earlier this month with regard to intersol charges:  
“With the introduction of Core Banking Solution (CBS), it is expected that customers of banks would be treated uniformly at any sales or service delivery point. It is observed, however, that some banks are discriminating against their own customers on the basis of one branch being designated as the “home branch” where charges are not levied for products services and other branches being referred to as “non-home” branches where charges are levied for the same products/services. This practice is contrary to the spirit of the Reserve Bank’s guidelines on reasonableness of bank charges. With a view to ensuring that bank customers are treated fairly and reasonably without any discrimination and in a transparent manner at all branches of banks/service delivery locations, banks are advised to: follow a uniform, fair and transparent pricing policy and not discriminate between their customers at home branch and non-home branches.”
 
However, banks in their anxiety to increase their fee-based income have been overtly and covertly flouting the guidelines of RBI and are levying charges indiscriminately for several services, which are neither fair nor equitable. For example, you can get your pass book updated at your home branch without any charges, but if you get the same pass book of the same account updated in another branch of the same bank, which is now possible under the CBS, many banks levy a charge for rendering such a service. This is being frowned upon by the RBI as it is discriminatory and against the spirit of RBI guidelines on reasonableness of bank charges. 
 
As a step towards removing this discrimination, it is necessary for the RBI to identify certain basic services rendered by every bank, and ensure that these services are offered free of all charges across the board, so that every customer of a bank is treated fairly, equitably and in a non-discriminate manner. 
 
The basic banking services can be divided into three parts:
1. Mandatory services: There are a number of services, which compulsorily go with the maintenance of savings bank and current accounts and in all fairness. These services should be made available to all banks’ customers without any charges. While opening an account is currently free, banks do charge a fee for closing the account within a certain period. A customer should have freedom to open and close the account whenever he wants, as it is the basic right of an individual to close an account if and when he finds that the services offered by the bank are not up to his expectations. In fact while opening the accounts, banks stipulate certain conditions for customers to follow, but conveniently omit to state their own obligations towards the customer. 
 
All services extended through the use of core banking technology (CBS) must be mandatorily offered free to every customer, as it does not add to the cost of operations of the bank. It is obvious that rendering a service at any of their branches (non-home branches) is equivalent to offering the same service at the home branch. Whether depositing or en-cashing a cheque, writing a pass-book or issuing a statement of account, transferring funds from one account to another in the same bank but in different places and whether collecting a cheque from another bank or paying a cheque in another place are part of the core banking activity and should be compulsorily available to all bank customers in all their branches free of all charges. The purpose of CBS is defeated if the benefits of such modern technology are not made available to the depositors free of cost at all branches of the bank. 
 
There are many other services like issuing an ATM-cum debit card, accepting  standing instructions for payment of utility bills through ECS, etc are all basic banking services, which should be available to all bank customers without any charges. Banks today charge fancy rates for all these services, without any regard for the convenience of the customers and without any relation to the cost involved in offering these services. 
There is, therefore, a need to codify all the basic banking services that deserve to be made available free of cost by all banks and RBI should not only come out with list of such basic services but also instruct banks to offer these services without any charges in the interest of transparency and fair treatment of bank customers.
 
2. Services that relate to security and safety of bank accounts: All the banks have a sacred duty to safeguard the interest of all customers by ensuring safety of their money and security of their accounts by virtue of having undertaken to accept their deposits and hold it in trust for them. It goes without saying that banks are obliged to keep the customers informed of all that affects their interest and this service should be offered without any charges to every customer of the bank. 
 
There are a number of services which go to preserve and protect the interest of depositors. For example, communicating a customer when a certain amount is withdrawn from his account is a security measure that helps banks to prevent frauds. As this service is beneficial to both, the bank and the customer, it is certainly unreasonable to levy a charge on such a service offered to the customer. 
                  
Recently it was pointed out by a Moneylife reader that one leading private sector bank has put up on their website a notice that from 1 May 2013, they would levy a charge of Rs15 per quarter for the SMS alert facility offered by the bank. Is this fair to the account holders when the intention of the bank to send such a message is to prevent frauds in their backyard? The RBI should identify all those services, which are in the nature of securing the safety and security of customers’ accounts and ensure provision of such services free of cost to the customers of all banks.
 
3. Services to senior citizens and or disabled persons: Senior citizens and disabled people need a wide variety of services from banks to enable them to lead a life of dignity. They deserve special treatment at the hands of all banks purely from the humanitarian angle. There is a need to identify all those specialized services that are required to be provided by banks to such deserving people without any charges to make their life a little more bearable and livable in these days of rising cost of living due to the stubborn inflation plaguing the country. 
 
For example, banks levy a penalty for withdrawing a deposit before maturity. Banks levy a charge for not maintaining a minimum balance in the account every month. Banks do levy a charge for issuing a duplicate pass book when the original is lost. These and a host of other types of charges can certainly be waived for senior citizens and or disabled account holders as a token of service to these people, who deserve help and assistance due to their old age and or disabilities.  
 
Need to empower the bank depositors: Unfortunately, the objective of the RBI to empower the bank depositors has remained only in paper, as nothing much has been done to empower them during the last two years and the level of customer service in both public and private sector banks has deteriorated further. This is one of the reasons why the rate of growth of bank deposits has been falling year after year and the savings rate in the country has fallen considerably over the years as people prefer to invest their surplus funds on gold or immovable property, instead of keeping with unhelpful banks.  
 
The RBI should, therefore, now take up the cause of depositors in right earnest not only in the interest of improving the savings rate in the country, but also with a view to restore the trust of the public and get their patronage before grating new banking licenses, as banks have lost the confidence of the general public due to their callous attitude towards the customers and the recent exposures of unhealthy practices in the functioning of commercial banks in our country.
 
(The second part of this two-part series on “Empowering bank depositors” which suggests compensating bank depositors if they fail to get the service they have the right to expect, will appear tomorrow.)
     
(The author is a banking analyst and writes for Moneylife under the pen-name of Gurpur.) 

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COMMENTS

D A Bhatt

4 years ago

As far as information available to me, the expenditure incurred for technology purchase, indigenization and implementation for improving banking services to customers is not directly born by individual banks and it has helped them in coming out of old traditional costly, bulging and bogging record keeping system. There fore it is now need of the time to well identify basic banking services and it should be made totally free to all customers.

Suresh C Ashawa

4 years ago

Very well written article for the benefit of Bank customers. The punjab National Bank does not encash third party cheques at other than Home branch. This is also discriminatory practice.
Suresh Ashawa
ashawa61@yahoo.com

hasmukh

4 years ago

Nice Article. Please keep it up. The Banks are taking their customers for a ride in their enthusiasm to boost their income,and this practice can be termed as "looting" only. RBI must come down heavily on them.
Also, Banks charging for Debit cards (after 1st year) is also not fair : No credit whatsoever is extended by Banks for Debit cards as the Account is debited immediately.
Thanks again for the Article.

arun adalja

4 years ago

some banks are charging for atm cards in second year.this should made free as it reduces 30 to 40% work load of bank.they must seperate atm and debit card and if somebody wants only atm card then it should be given.icici bank wants to charge for sms alert facility which is ridiculus as it can avoid fraud.rbi must force banks to follow the rules strictly.

pawan

4 years ago

good article. hope RBI takes measures on these issues

choksi R

4 years ago

Excellent article, a very valid point and issue.

I have accounts with Axis Bank and they charge me hundreds of rupees whenever cash is deposited/withdrawn at other than 'home branch'. You have very well highlighted the point that under 'CBS' there should not be any difference between a 'home branch' and 'other branch'. I hope RBI makes all the banks follow this.

REPLY

arun adalja

In Reply to choksi R 4 years ago

icici bank is not charging any service charge for other branch while psu banks are charging.

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